Property value in an undeclared inheritance and when subsequent effects are triggered
Jesús Ruíz Ballesteros
by Jesús Ruíz Ballesteros
Let's consider a case where more than 20 years have passed without being able to sign the Deed of Distribution and Acceptance of Inheritance due to disputes among the heirs, with several properties to inherit.
Statute of Limitations for Inheritance Tax in Undeclared Inheritance
Let's recall that the statute of limitations is four years from the obligation to file during the voluntary period. In our case, the Tax would be prescribed, although the Deed of Distribution and Acceptance of Inheritance must be executed, including the assets to be inherited and assigning them a value. This raises the second key question:
What is the value of the properties to include in the Deed?
Keep in mind that the value assigned to the properties in the Deed of Acceptance of Inheritance will be the acquisition value for the heirs for the purpose of declaring a gain if they sell it one day.
Normally, the value in the inheritance is what we now call the “reference value,” but this reference value did not exist years ago. Previously, the cadastral value, a declared value, or the market value was often used.
Therefore, the value to include in the Inheritance Deed is crucial, as if I sell it a year later, my Capital Gain will be determined by the difference between the future sale price and the acquisition price, which is the price stated in the Deed of Distribution and Acceptance of Inheritance.
Knowing that in our specific case the inheritance tax is prescribed, and I will not pay anything to receive the property, it would be advisable to indicate that the value in the Inheritance Deed is as high as possible (to reduce the future gain and thus the future Tax). In this regard, we should know that the Directorate-General for Taxes has already set an upper limit on the maximum price, which is the Market Value of the property, but note, at the time the Tax accrues, which is the date of death of the deceased.
Therefore, we must include a value that cannot exceed the market value as of the date of death and be able to prove it with any legally admissible evidence, such as an appraisal from that date.
Retroactivity of Inheritance Effects
Finally, it should be clarified that, in any case, all civil aspects of the inheritance and its effects are retroactive to the date of death. Therefore, the acquisition date of the property will be, by derivation from the Civil Code, the date it was acquired through inheritance, which occurs upon acceptance. However, the subsequent effects are retroactive to the moment of death of the deceased. Thus, once the inheritance is accepted, the acquisition is understood to have occurred at the time of death.
Jesús Ruíz Ballesteros is the Founder and Director of Ruiz Ballesteros. Holding an undergraduate degree in business and finance, a master’s in taxation, and a degree in law, Jesús is an innovative entrepreneur and an expert in the Spanish taxation system, international taxation and corporate commercial law. He is also the developer of Paxtum, the first legal app in Spain. In 2018, Jesús Ruíz Ballesteros was awarded the Cruz Blanca for Civilian Merit by the Ministry of the Interior of Spain. Contact Jesús.
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Ruiz Ballesteros Lawyers and Tax Advisors is a firm of lawyers, economists and tax advisors established over 15 years ago. Highly qualified professionals cover all areas of legal, tax, accounting and commercial requirements for clients. Continuous training, demonstrating excellence, taking care of every detail, and upholding high ethical standards are the guiding principles of the firm.
